Foreign exchange reserves remain stable and supported

Statistics released by the State Administration of Foreign Exchange recently show that as of the end of April 2023, the scale of our country's foreign exchange reserves was 3.2048 trillion US dollars, an increase of 20.90 billion US dollars from the end of March, an increase of 0.66%. The scale of our country's foreign exchange reserves has risen for two consecutive months and reached a new high of nearly 14 months.

Comprehensive factors

Regarding the reasons for the change in scale in April, the relevant person in charge of the foreign exchange administration introduced that due to factors such as global macroeconomic data and monetary policy expectations of major economies, the US dollar index fell and global financial asset prices generally rose. Under the combined effect of exchange rate translation and asset price changes, the scale of foreign exchange reserves rose in the month.

Pang Ming, Chief Economist and Research Director of JLL Greater China, believes that the scale of our country's foreign exchange reserves continued to rise in April, and the main driving factor behind it was still the combined effect of exchange rate changes and asset price changes. During the month, the decline of the US dollar index pushed up the exchange rate of non-US dollar currencies and the market value of asset prices. At the same time, changes in the global stock market, bond market and foreign exchange market formed a "positive valuation" effect on the scale of our country's foreign exchange reserves.

"The increase in foreign exchange reserves in April was 20.90 billion US dollars, which was mainly contributed by the exchange rate translation. The US dollar index fell in April, and the exchange rate of the euro and the British pound rose against the US dollar. The assets in the foreign exchange reserves will be converted into US dollars and there will be a book surplus. At the same time, the overall price of bonds rose in April, and the types of assets held in the foreign exchange reserves are mainly bonds, and there will be a book surplus. There are investment products in the foreign exchange reserves that mature every month, and they will also generate income," said Zhao Qingming, deputy director of the China Foreign Exchange Investment Research Institute.

On the currency front, the dollar exchange rate index (DXY) fell 0.8% to 101.7 in April, with non-dollar currencies appreciating overall, according to Minsheng Bank's research team. On the asset side, the dollar-denominated hedged global bond index rose 0.5% in April; the S & P 500 equity index rose 1.5%. The scale of foreign exchange reserves rose due to a combination of factors such as exchange rate translation and asset price changes.

Play the role of "stabilizer"

As a country's foreign exchange "home", foreign exchange reserves are an important guarantee for maintaining a country's economic and financial security. In recent years, due to factors such as changes in exchange rates and asset prices, the scale of foreign exchange reserves in many countries around the world has shown a downward trend. According to data released by the International Monetary Fund (IMF), the scale of global foreign exchange reserves fell by $1.30 trillion to $11.60 trillion in the first three quarters of 2022, a decrease of 10.22%. In this regard, Wen Bin, chief economist of Minsheng Bank, said that the scale of our country's foreign exchange reserves is basically stable and has always remained above 3 trillion US dollars, which is conducive to the international community to enhance confidence in our country's economic development, avoid large cross-border capital inflows and outflows from economic fundamentals, and give full play to the role of national economic and financial "stabilizer" and "ballast stone".

For a long time, the market has paid more attention to changes in the scale of foreign exchange reserves. When the scale decreases, some people worry about the stability of foreign exchange reserves; when the scale increases, they suspect that there is a problem with the inflow and outflow of hot money. In fact, the monthly data on the scale of foreign exchange reserves is the balance, that is, carrying value. The monthly increase and decrease in the scale of foreign exchange reserves is a normal phenomenon and needs to be viewed dialectically, without excessive worry. With the increase in the flexibility of the RMB exchange rate, the market's ability to adapt is also increasing. The decisive role of the market in the formation of the exchange rate will be better played. The function of the "automatic stabilizer" of the exchange rate is gradually emerging. The scale of our country's foreign exchange reserves will remain at a

Keep it stable overall

Industry insiders believe that our country strives to promote high-quality development, and economic development shows a good trend of recovery, which is conducive to the continued stability of foreign exchange reserves.

Zhou Maohua, a macro researcher at the financial marekt department of Everbright Bank, said that due to many uncertain factors in the global market, in the case of large fluctuations in overseas markets, the scale of our country's foreign exchange reserves still fluctuates to a certain extent; but in terms of favorable factors, the structure of our country's foreign exchange reserves is gradually optimized, the Federal Reserve's interest rate hike is coming to an end, our country's economy is on the recovery track, foreign trade shows resilience, foreign capital continues to be optimistic about the medium and long-term development prospects of China's economy, and foreign capital will still steadily invest in the Chinese market in the future. It is expected that the

"Uncertainties in the current unstable external environment are increasing, global economic growth is slowing down, inflationary pressures are high, and international financial marekts are increasing. In terms of foreign trade, our country has made efforts to promote high-quality development. In terms of foreign trade, it has taken a number of measures to optimize the development environment and trade mode of foreign trade, stabilize foreign trade enterprises and trade in key products, and foreign trade has shown resilience." Wen Bin's analysis believes that with the continuous strengthening of the endogenous power of our country's economy, international investors continue to be optimistic about the development potential and prospects of the Chinese market, and the overall balance of cross-border capital flows, all of which are conducive to the continued stability of foreign exchange reserves.

Pang Ming also expects that the nextforeign exchange marketIt will continue to maintain a stable operation, the balance of payments will continue to maintain an overall balance, international investors and overseas enterprises will continue to improve their expectations for the Chinese market, external shock risks will continue to be effectively prevented and resolved, and the attractiveness of RMB assets will be further enhanced, which is conducive to and conducive to the overall stability of foreign exchange reserves.

Recently, Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said at the press conference on the first quarter foreign exchange revenue and expenditure data that in the next step, the Administration of Foreign Exchange will focus on improving the level of cross-border trade and investment and financing facilitation, continue to improve the management of foreign exchange reserves with Chinese characteristics, and continuously improve the two-in-one management framework of "macro-prudential + micro-supervision" in the foreign exchange market.